For Oil Industry Transparency, Uganda Should Look to Other African Countries

Oil production in the Lake Albertine region of Uganda. Photo credit: Flickr/ The Access Initiative

Since the discovery of an abundance of oil in 2008, and despite the Parliament’s drafting of the Resolution of Parliament on the oil sector in 2011, Uganda’s extractive sector has avoided public disclosure of its oil production contracts and their revenue streams. But experiences in other African countries, such as Botswana, Ghana, the Republic of Congo, Liberia and Nigeria, provide evidence that the growth of extractive industries need not go hand-in-hand with secret government agreements and revenue corruption. While the path is not always smooth, as these countries progress toward greater transparency, they provide examples for Uganda to consider as its oil industry develops.
Despite public statements by senior government officials that oil development in Uganda will meet minimum social and environmental standards, and that oil proceeds will support policy objectives of economic growth and poverty reduction, there are signals from Kampala that suggest otherwise:

In April 2011, Ugandan newspapers reported that the country had used oil revenues to purchase six to eight fighter jets.

In August 2011, a leaked internal memo revealed that the government considered restricting parliamentary seats in the oil region to one ethnic party, in what many observers saw as an attempt to divert attention away from the government’s plans for oil revenue sharing.

In January 2012, Ugandan President Yoweri Museveni praised the president of Equatorial Guinea for his government’s proper use of oil revenues, even though that country’s record has come to symbolize oil-fueled corruption and nepotism.

Recently, the Ugandan executive branch of government, disregarding warnings from parliament to halt all oil business until clear petroleum laws are in place, signed new Production Sharing Agreements (PSAs), a common contract between government and companies concerning amounts and revenues of an extracted resource. The agreement enabled Tullow Oil to sell shares of its oil fields. Debates in Parliament are expected to be heated and some civil society organizations are developing a petition to the Constitutional Court calling for an injunction to not implement the PSAs until issues are resolved.

Rather than continue down this route, Uganda should consider the steps other African countries have taken to promote transparency and accountability in extractive sectors. Uganda should also take into account that these examples, with the exception of Botswana, have unclear long-term commitments and impacts.

Signs of Transparency and Accountability in Other African Countries

Mineral rich Botswana, upheld as one of the most stable and prosperous countries in Africa, ranks as the best governed and least corrupt on the continent. Since the discovery of diamonds in Botswana in 1967, the country has managed and invested its diamond revenues prudently and transparently in social services (e.g., primary education) and capital investments. Botswana also saves shares of its diamond revenues, which help boost its foreign exchange reserves. These efforts contribute to the country’s success as a middle-income country with a per capita GDP of $16,300 in 2011.

In May 2011, Ghana passed the Petroleum Revenue Management Act, which requires the government to publish quarterly information on receipts from petroleum companies, and the Minister of Finance to provide quarterly reports reconciling receipts and expenditures. The law establishes a 13-member Public Interest and Accountability Committee (PIAC), unveiled in December 2011, to monitor and evaluate how the government manages and uses petroleum revenues for public benefit. Following this law, the government released its production sharing agreements, along with the audited statements of its oil accounts and other oil information.

Since 2003, the Republic of Congo has required external auditors to quarterly certify oil revenues ensuring that oil company payments to the government match the government’s revenue receipts. The state oil company undergoes annual audits of its external accounts, consolidated financial statements, internal controls and fiscal agency functions (e.g., oil sales). Though it is not on the country’s official government website, the International Monetary Fund reports that the Republic of Congo publishes PSAs, monthly oil production and revenue data, and the oil revenue certification reports online.

In 2011, Liberia and Nigeria, countries with mixed records when it comes to transparency and corruption, passed a comprehensive Access to Information (ATI) Act and a national Extractive Industries Transparency Initiative Act, respectively, and both countries have made a wealth of oil and mineral information available to the public.

The State of Transparency and Accountability in Uganda’s Oil Sector

Moving toward greater accountability in Uganda will require that the government makes information on its decisions and actions available, and that it has the power to condemn poor behavior or to establish incentives for desired actions. Uganda, unfortunately, currently falls short in both areas:

Transparency in Government Actions: Despite a constitution that enshrines the right of ATI, a comprehensive ATI Act and new ATI Regulations, the oil sector in Uganda remains cloaked in secrecy. Following mounting pressure, the government finally released its PSAs to Parliament, but it has yet released them to the public. The public has had to resort to legal action to access information on oil developments. In 2010, a lower court declared the PSAs confidential referencing an exception in the ATI Act, although the plaintiffs (two local journalists) are appealing. And in 2010, Greenwatch, a Ugandan NGO, filed a petition with the High Court requesting the PSAs using the Constitution that has yet to be heard before the court.

Power to Sanction or Establish Incentives: In a well-functioning democracy, the legislature provides a check against the executive branch of government, and civil society performs independent overall government supervision. In Uganda, the parliament is dominated by the ruling party which holds 70 percent of the seats, providing little oversight of government, including over oil developments. NGOs have organized a Civil Society Coalition on Oil (CSCO), but their efforts are hampered by limited access to government-held information and limited opportunities to engage in governmental matters.

Oil development initiatives in Uganda must be neutrally monitored to ensure that government and oil companies are meeting their responsibilities, abiding by the law, and meeting social and environmental standards. This includes monitoring the performance of responsible government agencies and the practices of oil companies in the field. Effective monitoring requires access to government and company-held information such as the PSAs, and revenues collected and audits. In order to ensure that the environment is protected and rights of local communities are respected, Parliament should be empowered to perform its constitutional role, and civil society must be strengthened to meaningfully engage in, and contribute to government matters.

Comments

Botswana, right? What about the forced evictions and water supply denial to the Kalahari indigenous people who just happened to be living on the prospective diamond mine plots? Sure the government could do better than that...